Upcoming tax law change in 2010.

Yes, and

is the best full explanation I found. It includes the fact that you may not choose nondeductible IRAs for conversion, but must pool all IRA money to figure how much must be taxed at conversion.JOE

Thanks.

Unfortunate terminology. If one has two IRA accounts - one of which was funded with deductible contributions and one of which was funded with non-deductible contributions, one does not in any way have a nondeductible IRA and a deductible IRA. One has a single IRA - the sum of both individual accounts - and the overall single IRA has an effective tax basis (the amount of non-deductible contributions overall). One may have several IRA *accounts* but one only has one IRA (well, one traditional IRA - Roths are, in fact, distinct) - and one basis for it no matter how many accounts comprise the IRA and how the non-deductible contributions are distributed amonst them.

So, of course, for any money converted from any of those IRA accounts, if any of the accounts had non-deductible contributions, the overall ratio of deductible contributions to the overall value of the combined set of accounts implies the proportion of the conversion which is effectively after-tax dollars (and which then, in turn, reduces the basis for the remaining IRA).

You are correct. the Fairmark wording was "For example, if you happen to have a traditional IRA with $96,000 of money from a 401k rollover (zero basis) and you make a $4,000 nondeductible contribution to a new IRA, thinking you can convert it to a Roth at little or no cost, you'll be wrong." This perpetuates my thinking, that IRA deposits which were tax deductions somehow form a different IRA than the non-deducted money. You are correct, that one has an IRA, the number of accounts numbers or locations notwithstanding, and it has as basis the sum of the deposits not deducted. JOE

Yes. But since I'll still be working then, I may have to pay 38% tax (state too) on it. Probably better to incrementally convert after retirement in lower tax bracket in my case.